Deck 9: Entry Strategies and Organizational Structures

Question 1

Which organizational structure described in the chapter does ABB's "customer oriented" structure most closely resemble?

Answer 1

Answer: When ASEA AB and BBC Brown Boveri Ltd. Initially merged, the newly formed company adopted a matrix structure with the goal of being both global and local, big and small, and centralized and decentralized. However, the structure proved to be too complex and in 2001, ABB shifted to a structure that enabled the company to better focus on its customer. Under the new structure, customers were divided into four main groups depending in the industries involved, and were served by a single area. Many students will probably suggest that ABB's customer centric approach is most similar to a mixed structure in which the organization is divided into product areas, but then organized according to end user fields. Within these end user fields, all product, functional, and geographic information is handled by single areas.

Question 2

What are some current issues facing Australia? What is the climate for doing business in Australia today?

Answer 2

Not Answer

Question 3

The EU currently is developing a strategy that will help member countries beat back the threat of U.S.and Asian competition and develop a strong technological base for new product development.European multinational firms currently are strong in a number of different areas.For example, Germany's Hoechst and BASF and Switzerland's Sandoz and Hoffman-LaRoche are major companies in chemicals and pharmaceutics.Philips of the Netherlands invented compact discs and is dominant in the television market.Many strong European-based MNCs could provide a solid base for the EU to defend itself from outside economic invasion.
Ruehter Laboratories, a high-tech R D firm located in New Jersey, holds a number of important pharmaceutical patents and would like to expand its operation worldwide.The company is considering buying a small but highly profitable Dutch insulin maker."This acquisition will help us enter the European market by getting in on the ground floor," noted the president.
Although the Dutch firm is quite small, it has strong R D prowess and likely will play a major role in biotechnology research during the years ahead.Ruehter has talked to the Dutch firm, and the two have arrived at a mutually acceptable selling price.While waiting for the lawyers to work out the final arrangements, Ruehter intends to reorganize its overall operations so that the home-office management can work more closely with its new Dutch subsidiary.There are two areas that Ruehter intends to address in its reorganization efforts: (1) how the subsidiary will be structurally integrated into the current organization and (2) whether there can be any joint R D efforts between the two groups.
What type of organization design would you recommend that Ruehter use?

Answer 3

Organizational design is a step-by-step methodology that identifies functional aspects of work flows, course of action, structures, and administration, rearranges them for current business reality/goals, and then develops plans to execute new changes. This procedure emphasis on surpassing the technical and workforce aspects of the business. In most firms, the plan procedure conduct to more successful organizational design, notably improved results which includes profitability, client service, internal operating and empowering and committed employees to the business. The deployment process features a comprehensive and holistic approach to organizational development that affects all aspects of organizational life.
As part of product/service management, decisions need to make concerning the organizational arrangements of developing, directing, and eradicating products/services. This arrangement incorporate the structure and format of the pertinent activities and the related functional units.
The Initial Division Structure would be the appropriate organization design for Reuhter to use. Because it was Reuhter's first acquisition into international market by setting up a new Dutch subsidiary. Many firms who enters the international market initially uses this subsidiary arrangement, just as Reuhter is planning to do for handling finance related business or other operations that requires an on-site presence from the start. Since the product is so narrow, the Dutch Managers can report directly to the management personnel of marketing in New Jersey and international operations are coordinated by this department. If the firm with a large-scale product line and wants to export several different products to the international market, the export manager leads a separate department and often directly reports to the president. Thus, the Dutch subsidiary could eventually manufacture Reuhter more product besides insulin.
These two organization arrangements work well as long as the company is less competitive and uses the international scale to complement the domestic scale. In addition, export arrangement allow companies to reduce the risk and scale of their investments in establishing significant international business while simultaneously testing the capacity of the international market.

Question 4

If there were joint R D efforts, would this be a problem?

Question 5

Australia is the smallest continent but the sixth-largest country in the world.It lies between the Indian and Pacific oceans in the Southern Hemisphere and has a landmass of almost 3 million square miles (around 85 percent the size of the United States).Referred to as being "down under" because it lies entirely within the Southern Hemisphere, it is a dry, thinly populated land.The outback is famous for its bright sunshine, enormous numbers of sheep and cattle, and unusual wildlife, such as kangaroos, koalas, platypuses, and wombats.Over 20 million people live in this former British colony.Although many British customs are retained, Australians have developed their own unique way of life.One of the world's most developed countries, Australia operates under a democratic form of government somewhat similar to that of Great Britain.Gross domestic product was $824.3 billion in 2009.
A large financial services MNC in the United States examined the demographic and economic data of Australia.This MNC concluded that there would be increased demand for financial services in Australia.As a result, the company set up an operation in the capital, Canberra, which is slightly inland from Sydney and Melbourne, the two largest cities.
This financial services firm began in Chicago and now has offices in seven countries.Many of these foreign operations are closely controlled by the Chicago office.The overseas personnel are charged with carefully following instructions from headquarters and implementing centralized decisions.However, the Australian operation will be run differently.Because the country is so large and the population spread along the coast and to Perth in the west, and because of the "free spirit" cultural values of the Aussies, the home office feels compelled to give the manager of Australian operations full control over decision making.This manager will have a small number of senior-level managers brought from the United States, but the rest of the personnel will be hired locally.The office will be given sales and profit goals, but specific implementation of strategy will be left to the manager and his or her key subordinates onsite.
The home office believes that in addition to providing direct banking and credit card services, the Australian operation should seek to gain a strong foothold in insurance and investment services.As the country continues to grow economically, this sector of the industry should increase relatively fast.Moreover, few multinational firms are trying to tap this market in Australia, and those that are doing so are from British Commonwealth countries.The CEO believes that the experience of the people being sent to Australia (the U.S.expatriates) will be particularly helpful in developing this market.He recently noted, "We know that the needs of the Australian market are not as sophisticated or complex as those in the United States, but we also know that they are moving in the same direction as we are.So we intend to tap our experience and knowledge and use it to garner a commanding share of this expanding market."
www.csu.edu.au/australia.
What are some current issues facing Australia? What is the climate for doing business in Australia today?

Question 6

How might such a structure help or hinder entry into new markets?

Question 7

Every MNC tries to drive down costs by getting its goods and services to the market in the most efficient way.Good examples include auto firms such as Ford Motor and Volkswagen, which have worldwide operations.In recent years Ford has begun expanding into Europe and VW has begun setting up operations in Latin America.By building cars closer to the market, these companies hope to reduce their costs and be more responsive to local needs.At the same time this strategy requires a great deal of organization and coordination.Visit the websites of both firms and examine the scope of their operations.The Web address for Ford Motor is www.ford.com, and for Volkswagen it is www.vw.com.Then, based on your findings, answer these questions: What type of organizational arrangement(s) do you see the two firms using in coordinating their worldwide operations? Which of the two companies has the more modern arrangement? Do you think this increases that firm's efficiency, or does it hamper the company's efforts to contain costs and be more competitive? Why?

Question 8

What type of organizational structural arrangement is the MNC going to use in setting up its Australian operation?

Question 9

One of the most common entry strategies for MNCs is the joint venture.Why are so many companies opting for this strategy? Would a fully owned subsidiary be a better choice?

Question 10

Does a matrix or customer-oriented structure lend itself better to forming joint ventures and alliances?

Question 11

The EU currently is developing a strategy that will help member countries beat back the threat of U.S.and Asian competition and develop a strong technological base for new product development.European multinational firms currently are strong in a number of different areas.For example, Germany's Hoechst and BASF and Switzerland's Sandoz and Hoffman-LaRoche are major companies in chemicals and pharmaceutics.Philips of the Netherlands invented compact discs and is dominant in the television market.Many strong European-based MNCs could provide a solid base for the EU to defend itself from outside economic invasion.
Ruehter Laboratories, a high-tech R D firm located in New Jersey, holds a number of important pharmaceutical patents and would like to expand its operation worldwide.The company is considering buying a small but highly profitable Dutch insulin maker."This acquisition will help us enter the European market by getting in on the ground floor," noted the president.
Although the Dutch firm is quite small, it has strong R D prowess and likely will play a major role in biotechnology research during the years ahead.Ruehter has talked to the Dutch firm, and the two have arrived at a mutually acceptable selling price.While waiting for the lawyers to work out the final arrangements, Ruehter intends to reorganize its overall operations so that the home-office management can work more closely with its new Dutch subsidiary.There are two areas that Ruehter intends to address in its reorganization efforts: (1) how the subsidiary will be structurally integrated into the current organization and (2) whether there can be any joint R D efforts between the two groups.
If there were joint R D efforts, would this be a problem?

Question 12

Can this MNC benefit from any of the new organizational arrangements, such as a joint venture, the Japanese concept of keiretsu , or electronic networks?

Question 13

Australia is the smallest continent but the sixth-largest country in the world.It lies between the Indian and Pacific oceans in the Southern Hemisphere and has a landmass of almost 3 million square miles (around 85 percent the size of the United States).Referred to as being "down under" because it lies entirely within the Southern Hemisphere, it is a dry, thinly populated land.The outback is famous for its bright sunshine, enormous numbers of sheep and cattle, and unusual wildlife, such as kangaroos, koalas, platypuses, and wombats.Over 20 million people live in this former British colony.Although many British customs are retained, Australians have developed their own unique way of life.One of the world's most developed countries, Australia operates under a democratic form of government somewhat similar to that of Great Britain.Gross domestic product was $824.3 billion in 2009.
A large financial services MNC in the United States examined the demographic and economic data of Australia.This MNC concluded that there would be increased demand for financial services in Australia.As a result, the company set up an operation in the capital, Canberra, which is slightly inland from Sydney and Melbourne, the two largest cities.
This financial services firm began in Chicago and now has offices in seven countries.Many of these foreign operations are closely controlled by the Chicago office.The overseas personnel are charged with carefully following instructions from headquarters and implementing centralized decisions.However, the Australian operation will be run differently.Because the country is so large and the population spread along the coast and to Perth in the west, and because of the "free spirit" cultural values of the Aussies, the home office feels compelled to give the manager of Australian operations full control over decision making.This manager will have a small number of senior-level managers brought from the United States, but the rest of the personnel will be hired locally.The office will be given sales and profit goals, but specific implementation of strategy will be left to the manager and his or her key subordinates onsite.
The home office believes that in addition to providing direct banking and credit card services, the Australian operation should seek to gain a strong foothold in insurance and investment services.As the country continues to grow economically, this sector of the industry should increase relatively fast.Moreover, few multinational firms are trying to tap this market in Australia, and those that are doing so are from British Commonwealth countries.The CEO believes that the experience of the people being sent to Australia (the U.S.expatriates) will be particularly helpful in developing this market.He recently noted, "We know that the needs of the Australian market are not as sophisticated or complex as those in the United States, but we also know that they are moving in the same direction as we are.So we intend to tap our experience and knowledge and use it to garner a commanding share of this expanding market."
www.csu.edu.au/australia.
What type of organizational structure arrangement is the MNC going to use in setting up its Australian operation?

Question 14

Will this operation be basically centralized or decentralized?

Question 15

A small manufacturing firm believes there is a market for hand?held tools that are carefully crafted for local markets.After spending two months in Europe, the president of this firm believes that his company can create a popular line of these tools.What type of organization structure would be of most value to this firm in its initial efforts to go international?

Question 16

Australia is the smallest continent but the sixth-largest country in the world.It lies between the Indian and Pacific oceans in the Southern Hemisphere and has a landmass of almost 3 million square miles (around 85 percent the size of the United States).Referred to as being "down under" because it lies entirely within the Southern Hemisphere, it is a dry, thinly populated land.The outback is famous for its bright sunshine, enormous numbers of sheep and cattle, and unusual wildlife, such as kangaroos, koalas, platypuses, and wombats.Over 20 million people live in this former British colony.Although many British customs are retained, Australians have developed their own unique way of life.One of the world's most developed countries, Australia operates under a democratic form of government somewhat similar to that of Great Britain.Gross domestic product was $824.3 billion in 2009.
A large financial services MNC in the United States examined the demographic and economic data of Australia.This MNC concluded that there would be increased demand for financial services in Australia.As a result, the company set up an operation in the capital, Canberra, which is slightly inland from Sydney and Melbourne, the two largest cities.
This financial services firm began in Chicago and now has offices in seven countries.Many of these foreign operations are closely controlled by the Chicago office.The overseas personnel are charged with carefully following instructions from headquarters and implementing centralized decisions.However, the Australian operation will be run differently.Because the country is so large and the population spread along the coast and to Perth in the west, and because of the "free spirit" cultural values of the Aussies, the home office feels compelled to give the manager of Australian operations full control over decision making.This manager will have a small number of senior-level managers brought from the United States, but the rest of the personnel will be hired locally.The office will be given sales and profit goals, but specific implementation of strategy will be left to the manager and his or her key subordinates onsite.
The home office believes that in addition to providing direct banking and credit card services, the Australian operation should seek to gain a strong foothold in insurance and investment services.As the country continues to grow economically, this sector of the industry should increase relatively fast.Moreover, few multinational firms are trying to tap this market in Australia, and those that are doing so are from British Commonwealth countries.The CEO believes that the experience of the people being sent to Australia (the U.S.expatriates) will be particularly helpful in developing this market.He recently noted, "We know that the needs of the Australian market are not as sophisticated or complex as those in the United States, but we also know that they are moving in the same direction as we are.So we intend to tap our experience and knowledge and use it to garner a commanding share of this expanding market."
www.csu.edu.au/australia.
Can this MNC benefit from any of the new organizational arrangements, such as a joint venture, the Japanese concept of keiretsu, or electronic networks?

Question 17

If the company in question 2 finds a major market for its products in Europe and decides to expand into Asia, would you recommend any change in its organization structure? If yes, what would you suggest? If no, why not?

Question 18

Australia is the smallest continent but the sixth-largest country in the world.It lies between the Indian and Pacific oceans in the Southern Hemisphere and has a landmass of almost 3 million square miles (around 85 percent the size of the United States).Referred to as being "down under" because it lies entirely within the Southern Hemisphere, it is a dry, thinly populated land.The outback is famous for its bright sunshine, enormous numbers of sheep and cattle, and unusual wildlife, such as kangaroos, koalas, platypuses, and wombats.Over 20 million people live in this former British colony.Although many British customs are retained, Australians have developed their own unique way of life.One of the world's most developed countries, Australia operates under a democratic form of government somewhat similar to that of Great Britain.Gross domestic product was $824.3 billion in 2009.
A large financial services MNC in the United States examined the demographic and economic data of Australia.This MNC concluded that there would be increased demand for financial services in Australia.As a result, the company set up an operation in the capital, Canberra, which is slightly inland from Sydney and Melbourne, the two largest cities.
This financial services firm began in Chicago and now has offices in seven countries.Many of these foreign operations are closely controlled by the Chicago office.The overseas personnel are charged with carefully following instructions from headquarters and implementing centralized decisions.However, the Australian operation will be run differently.Because the country is so large and the population spread along the coast and to Perth in the west, and because of the "free spirit" cultural values of the Aussies, the home office feels compelled to give the manager of Australian operations full control over decision making.This manager will have a small number of senior-level managers brought from the United States, but the rest of the personnel will be hired locally.The office will be given sales and profit goals, but specific implementation of strategy will be left to the manager and his or her key subordinates onsite.
The home office believes that in addition to providing direct banking and credit card services, the Australian operation should seek to gain a strong foothold in insurance and investment services.As the country continues to grow economically, this sector of the industry should increase relatively fast.Moreover, few multinational firms are trying to tap this market in Australia, and those that are doing so are from British Commonwealth countries.The CEO believes that the experience of the people being sent to Australia (the U.S.expatriates) will be particularly helpful in developing this market.He recently noted, "We know that the needs of the Australian market are not as sophisticated or complex as those in the United States, but we also know that they are moving in the same direction as we are.So we intend to tap our experience and knowledge and use it to garner a commanding share of this expanding market."
www.csu.edu.au/australia.
Will this operation be basically centralized or decentralized?

Question 19

If this same company finds after 3 years of international effort it is selling 50 percent of its output overseas, what type of organizational structure would you suggest for the future?

Question 20

Why are keiretsus popular? What benefits do they offer? How can small international firms profit from this development? Give an example.

Question 21

In what way do formalization, specialization, and centralization have an impact on MNC organization structures? In your answer, use a well?known firm such as IBM or Ford to illustrate the effects of these three characteristics.

Question 22

What type of organization design would you recommend that Reuhter use?